Radio Outlook 2018

The clock is ticking on the 115th Congress and if its first half accomplishments are any indication, several items of legislation that would impact radio may struggle to gain traction in the coming months. No issue looms larger than a performance royalty and music copyright reform.

“There are a lot of pieces of legislation floating around that could be included in copyright reform, and some are bad for radio,” National Association of Broadcasters president Gordon Smith said. “We approach this issue with the mindset that everything is on the table.”

The issue that’s cast a shadow over radio for more than a decade has been whether Congress will pass a law reversing AM/FM radio’s performance royalty exemption. For broadcasters who believe the industry’s long-standing position that on-air promotion more than pays for the music stations use, some relief likely came last month when a majority of House members said they didn’t support a unilateral move to adopt a performance royalty for broadcast radio. “It is a show of strength to the other side that it would be a heavy lift to impose a job-killing performance royalty on broadcast radio,” Smith said.

Rallying members of Congress to support radio’s position has been a successful strategy for radio during the past decade. Chris Israel, executive director of the musicFirst Coalition, said the music industry concedes broadcasters are able to get lawmakers to sign the resolution, but he thinks radio’s energy would be better spent in discussions with music creators to talk about what’s happening in the marketplace. “Political heft doesn’t always dictate marketplace realities and the fact is it’s a complex and evolving market for radio,” he said.

The anti-royalty resolution may be nonbinding, as the music industry frequently points out, but National Religious Broadcasters VP of government relations Aaron Mercer thinks it carries more weight than a typical legislative resolution. “The show of strength on the Local Radio Freedom Act shows members of Congress understand this is an important issue for local radio stations in local communities and that is a powerful statement,” Mercer said. He believes it is enough to effectively kill any prospect for a performance royalty bill to pass during the current session. “If members of Congress are willing to sign their names on to a bill that is very clear as to what its intent would be, I think that sends a strong message,” Mercer said.

At the same time the proposed Fair Play Fair Pay Act (H.R. 1836) introduced by Rep. Jerrold Nadler (D-NY) now counts 31 supporters in the House. It would not only create a performance royalty on AM/FM airplay but would also require stations to pay royalties on songs recorded before Feb. 15, 1972, when federal copyright protection began.

But the NAB doesn’t seem worried. “With 2018 being an election year, it is unlikely much gets done on the legislative front [this] year. That is especially true for controversial issues such as performance royalty,” Smith said.

Copyright Reform Waits In The Wings

The debate over a performance royalty is just one part of a larger effort in Congress to address music copyrights. House Judiciary Committee chair Bob Goodlatte (R-VA) has been leading a four-year effort to update copyright laws and he told Inside Radio last week he plans to hold field hearings in New York within the next few weeks that will specifically look at the music industry. Goodlatte thinks it’s a segment of copyright statute that is ripe for modernization. “As technology continues to rapidly advance, we must ensure that our copyright system can keep pace,” he said.

Included in the copyright reform discussions is the lack of a performance royalty on AM/FM radio. It was at the urging of Goodlatte that the NAB and the record industry returned to the negotiating table last year in an attempt to reach an agreement on the long-running dispute over whether broadcasters should pay for music airplay.

Those conversations have been informal and cordial, according to both sides, and so far no actual proposal has been put on the table. Some ideas have also been rejected, such as creating an opt-in system which the record labels say wouldn’t help them convince foreign markets to reverse their retaliatory policies and begin paying fees to American artists. “I’m not at liberty to reveal details of those discussions but I can say that we are not close to an agreement,” Smith said.

Israel thinks there has been “good and constructive dialogue” so far and believes the two sides are making progress, explaining the focus has remained “conceptual” around what type of framework could be workable. “I think 2018 presents a really interesting and constructive situation where you have the right leaders in the right place and some solutions that are out there to be had,” he said. With a debate that has spanned decades, there are some members of Congress “who are quite involved, who have put a lot of effort and energy into trying to do their part to create good dialogue, and we do think there’s an opportunity in 2018 to try to get some issues over the finish line,” Israel said. But despite Goodlatte’s planned retirement at the end of the year, Israel doesn’t think it’s a do-or-die moment for royalty advocates. “There are always new windows that open up,” he said.

Legislative leaders haven’t set a deadline for the radio and record industries, hoping a quickly-evolving marketplace and competitive pressures on radio from streaming services will be more effective at incentivizing the two sides to reach a deal.

While the two industries remain in talks, the issue remains active on Capitol Hill too. “If there is some kind of agreement between the music community and radio, it would require some type of legislative structure to effectuate it, so the two do feed each other,” Israel explained.

Goodlatte has said that while music copyrights remain a “high priority” for the Judiciary Committee he said they also haven’t settled on any particular legislative package on which to rally around. A sizable challenge would likely be the inertia that continues to hold a grip on Congress. But Smith isn’t counting out Goodlatte’s ability to break through. “He has shown an appreciation for his hometown radio stations and proven himself a skilled lawmaker. If anyone can get copyright reform next year, it is him,” Smith said. “However, 2018 is an election year. I don’t know what lawmakers’ appetite will be to get copyright reform done.”

One radio lobbyist said that if the radio and music industries were able to create a genuine consensus package, members of Congress would be “very interested” in taking action. “The broadcast industry has many champions on the Hill and if a bill moves it is hard to imagine it not being a net benefit to our industry because of the acknowledged value we provide to our listeners, the local communities we serve, and the content creators themselves,” the lobbyist said.